The Next Level in Business Intelligence

To improve the value of business intelligence to the enterprise, banks are centralizing BI efforts and improving data management, as well as turning to predictive analytics.

While the goals of business intelligence always have been to improve the value of customer relationships and thus the bank's bottom line, the ever-increasing competitive business environment in financial services is forcing banks to rethink their BI strategies. A new philosophy centered around enterprisewide use of BI tools -- coupled with advances in analytics and data management -- is helping banks make better and more-profitable business decisions.

All the arrows point to the increasing priority placed on BI by financial services firms. As companies seek to enhance their decision-making capabilities for everything from underwriting to cross-selling to risk management, investment in BI-related technology is on the rise in banking -- according to TowerGroup (Needham, Mass.), spending on BI will reach $16 billion to $17 billion in 2006.

And in a recent Gartner (Stamford, Conn.) survey of 1,400 CIOs who head IT organizations employing an average of 300 IT professionals with an average IT budget of $71 million, respondents identified BI as their top technology priority in 2006. Additionally, the CIOs -- 16 percent of whom are from the financial services sector -- reported plans to increase their BI budgets by an average of 4.8 percent in 2006. Further, Gartner forecasts that the new license revenue in the worldwide BI software market will reach $2.5 billion this year, a 6 percent increase from 2005.

From Tactical to Strategic

To optimize their BI investments, however, banks have some work to do, experts agree. Traditionally, banks have used business intelligence in a compartmentalized manner, according to Betsy Burton, VP and research area director at Gartner. Each business unit had its own business intelligence tools, she says, partly because bank units often compete internally with each other. But the current globally competitive landscape is forcing banks to rethink their use of business intelligence.

"Banks need to begin looking at business intelligence generally, not specifically, something the retail manufacturing industry is already doing well," Burton says. To realize the full potential of BI tools, banks must view BI on an enterprisewide basis, she suggests, adding that banks should decide where they want to go as a whole, not as individual units. "In the past, banks haven't had to think strategically because they had been making so much money," Burton says. Now, banks need to "get together on a strategic level," she advises.

Other industry observers share Burton's point of view. "Banks have very disparate [BI] technology systems," says Guillermo Kopp, VP, cross industry, for TowerGroup. "It's all over the place."

According to a report coauthored by Andrew Kellett, senior research analyst at London-based Butler Group, "The era in which the isolated use of multiple BI tools can be relied upon to support enterprise decision making is outdated, inefficient and must come to a close." Further, the report, "Business Intelligence -- A Strategic Approach to Extending and Standardizing the Use of BI," asserts that, "Over the last five years, business has spent too much of its IT budget on the purchase of ineffective departmentally focused data and interrogation tools."

To centralize BI decision making, financial institutions are creating dedicated, cross-functional groups within the organization known as business intelligence competency centers (BICC). BICCs are akin to advisory panels or user groups that oversee the overall business strategy within a bank. The job of the BICC is to assess the goals of business intelligence initiatives, oversee technology implementations and measure the success of completed projects. "As BI becomes increasingly more strategic, IT departments are looking for ways to manage and support deployments across divisions, regions and functions," according to "Building a Better Business Intelligence Competency Center," a June report from Ottawa-based BI-software provider Cognos. "A BI competency center can provide the centralized knowledge and best practices to help make this broader BI initiative possible." (See related sidebar for more on BICCs.)

Banks with established BICCs seem happy with the results. "We have made a significant investment in business intelligence technologies and want business users to take full advantage of this," said Yves Roelandt, department head BICC, KBC Bank & Insurance Group (Brussels; US$402 billion in assets) in a June 2005 release from BI provider SAS (Cary, N.C.). "The competency center provides a single point of contact to the BI expertise and knowledge in our organization. This enables us to efficiently support the needs of business users and transfer the skills they need to get the intelligence they need to drive the business forward."

Organizing an enterprisewide BI strategy in banks with numerous BI tools in their different units, however, may be a pipe dream for many large banks because of the sheer number of disparate systems, points out TowerGroup's Kopp. Still, these banks should try to combine BI systems across separate units where possible if an overall strategic plan isn't an option, he says. "Absent complete integration, [banks] are combining across information silos," Kopp says.